Mining industry decides more rules are the way to go

Canada’s most powerful mining associations are moving one step ahead of Ottawa by suggesting the creation of anti-corruption rules that will mirror similar regulations released last month in the United States.

“We kind of realized the writing was on the wall,” said Ben Chalmers,vice-president of sustainable development at the Mining Association of Canada. “We agree with the concept. We thought it was time to be proactive and help shape what this would look like and be part of the solution instead of providing opposition.”

The Mining Association of Canada (MAC), the Prospectors and Developers Association of Canada (PDAC), Publish What You Pay Canada and the Revenue Watch Institute are announcing today the creation of a working group that will take one year to figure how companies can be best made to disclose payments to governments overseas.

“What we’re hoping to create is a framework that would somewhat be like legislation but of course would not be legislation,” said Claire Woodside, director of Publish What You Pay Canada. “It would include details that will become useful to legislators.”

The effort will bring Canada in line with other efforts globally to shine light on the corruption-plagued extractive sector in developing countries.

Last month, the U.S. Securities and Exchange Commission revealed new rules that will force extractive companies to annually disclose all payments to governments, known as Amendment 1504.

Closer to home, Liberal MP John McKay has announced plans to table a private member’s bill this fall that would create mirror regulations to the U.S. rules in Canada.

Even the European Union is under pressure to update its transparency rules and bring them in line with Washington’s.

The civil society partnership amounts to a major turnaround for the mining sector in Canada, which has only supported industry-led, voluntary mechanisms to improve miners’ relations with communities overseas in the past.

Both MAC and PDAC opposed the passage of bill C-300, a private member’s bill tabled by McKay in 2010, which would have made it difficult for Crown corporations to invest in mining companies with reputations for human rights abuses.

The fight over C-300 was a wake-up call for the industry, said Chalmers.

“It really caused our members to realize that we have such a big presence on the global mining scene that there really is a need to have a position on issues that extend beyond domestic ones,” he said.

PDAC and MAC has decided to prioritize the myriad corporate social responsibility issues that have beset their industry and decided to focus on easier targets – like transparency – first, said Ross Gallinger, PDAC’s executive director.

“Let’s work through these ones and we’ll try and keep a watchful eye on the issues that are brewing,” said Gallinger. “We’re not against accountability and consequences.”

Work towards the transparency partnership began in earnest last winter when Publish What You Pay made overtures to MAC and Revenue Watch targeted PDAC.

Both NGOs were crucial to the creation of the U.S. transparency rules, and both mining associations said the prospect of new regulations coming out of Washington inclined them to join the anti-corruption groups.

But now the hard work of negotiating what the rules should look like begins.

Canada doesn’t have a national securities regulator, so despite the partnership’s aim of creating a legislative proposal that mimics the U.S. rules, they have to be adapted to the Canadian context.

The rules could be enforced by provincial security regulators or a branch of the federal government, but that’s to be decided through talks over the next year.

Another difference lies with what some critics have called a loophole in the U.S. rules.

Those regulations state that companies must disclose all payments made at project level, and the SEC says all companies all function with a definition of “project” and so it decided to refrain from providing a definition.

But critics say that some companies will define a project as an entire country or an ore formation – as some firms proposed doing in lobbying efforts – to avoid disclosing more controversial payments.

In Canada, where companies have to file a document that describes information at the project level in order to list publically, called National Instrument 43-101, the industry already has a definition of “project,” said Woodside.

Despite these differences, the goal is to make rules that will blend seamlessly with the U.S. regulations, said Chalmers.

“We want to make this the least burdensome possible,” he said.

The working group will hold its first public meeting on September 13 in Vancouver and will follow that with closed-door meetings.

The minutes to that meeting and others will be shared publically however, said Chalmers, “given that it’s a transparency issue.”

The group hopes to complete a draft document by the New Year and a final recommendation to the federal and provincial governments by June 2013. The Canadian Association of Petroleum Producers, which would also be impacted by any legislation, are observers to the partnership.

In the meantime, the Department of Foreign Affairs and International Trade, the Canadian International Development Agency and Natural Resources Canada have all been notified of the group’s intentions.

But Ottawa, which has shied away from increasing corporate accountability rules on the mining sector in the past, is not formally part of the process.

“So far we don’t have any commitment from the government of Canada or any of the provinces that they want to actually implement these rules,” said Andrew Bauer, economic analyst at Revenue Watch’s headquarters in New York.